FDI optimism, Goldman Sachs upgrade buoy mkt sentiment

SummaryBuoyed by strong global cues as also positive news flow on the political front, Indian equities rallied smartly on Thursday with the benchmark Sensex crossing the psychological 19,000-point mark to close at its highest level in 19 months.

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the second day, the Rajya Sabha is yet to announce the schedule of the debate. Although the voting is only of symbolic value and cannot legally bar the government from going ahead with its decision to allow foreign retail biggies to pick up stakes of up to 51% in multi-brand retail operations, an Opposition win would still be deeply embarrassing for the ruling coalition. While the government is fairly comfortably placed in the Lower House, it is is a bit jittery over the numbers in the Upper House. In the Rajya Sabha, with an effective strength of 244, the UPA has only 94 members and will have to rely on the 10 nominated members, besides the BSP’s 15 members and the SP’s 9.

To its chagrin, the SP kept everyone guessing on Thursday on its strategy for the vote in the Upper House. The government expects the party, firmly opposed to the FDI decision, to abstain from voting.

The UPA has the support of 265 MPs in the Lok Sabha, which has a total strength of 545. With the support of the SP (22) and BSP (21), it is expected to get more than 300 votes when the motion on FDI is taken for vote. The UPA needs 273 votes to win the vote on FDI.

In September, the government had unleashed a wave of big-ticket reforms, hiking the price of diesel by Rs 5 per litre, capping the supply of subsidised liquefied petroleum gas and allowing foreign supermarket chains to enter the country.

“The global situation looks less worrisome at the moment and there is hope that the US fiscal cliff will be averted. There is also confidence now that the Indian government may have the numbers to get the vote on FDI in retail,” said Andrew Holland, CEO, Investment Advisory, Ambit Capital, citing the reasons for the upbeat mood in the markets.

The 30-share BSE Sensex rose 328 points or 1.75% to close at 19,170, while the broader 50-share Nifty rose 1.7% or 97.5 points to 5,825. Both the benchmark indices are up more than 11% in the last three months on hopes of policy reforms and receding global woes. Despite the uptick, the BSE Sensex is currently trading at 16 times its FY13 earnings, which is in line with its long-term averages.

The story was similar for European indices, which opened strong on Thursday. The FTSE and DAX were up 0.87% and 0.70%,